Partners: HP's Economic Leverage Having An Impact On Cisco

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HP partners say they that the economic leverage that the $123 billion computer giant is wielding is already providing them with bigger profits when they sell HP over Cisco in the networking market.

Rick Chernick, the CEO of Camera Corner Connecting Point, a solution provider based in Green Bay, Wis. that partners with both vendors, said that HP simply has the "best economics in the industry."

"They are easy to work with and you can make good money," he says. "That is the name of the game."

Chernick is one of more than a thousand HP Americas partners that are getting a lesson in channel economics from HP at the Americas Partner Conference this week.

Partners say that HP is leveraging a wide range of PartnerOne channel program incentives to beat Cisco from New Business Opportunity (NBO) rebates to accelerator rebates that kick in when partners meet their sales quotas for the quarter.

Partners said the wide range of HP incentives are in sharp contrast to Cisco, which simply does not have as many channel program levers to pull to provide backend rebates around a broad converged networking infrastructure solution like HP. With only $36 billion in annual sales, Cisco simply does not have as much economic leverage as HP, according to partners.

One top solution provider executive, who partners with both HP and Cisco in the networking market, said the risk -reward ratio for going "All In" with HP on servers, storage and networking products favors HP over Cisco.

The partner pointed to recent rebate checks from HP for the quarter that were nearly $100,000 for New Business Opportunity (NBO) rebates and business class consulting centered on HP ProCurve networking and another nearly $100,000 check for exceeding quarterly sales quotas.

The top solution provider executive said the HP ProCurve networking incentives have been upped considerably by HP. On a recent deal, he said, the additional rebate from participating in PartnerOne programs amounted to an additional 16 percent gross margin dollars. "The new back end money is significant," he said. "On a big ProCurve sale in the past we would only get 2-3 percent. The backend money is the future for resellers that want to be successful. A reseller can't live on 2-3 percent margin."